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Zoom Communications a risk worth taking into earnings.

Its time to talk about another high flying COVID-19 stock! Here is the breakdown on $ZM otherwise known as Zoom!

Current Price: $282.28

52/Wk High: $295.87

52/Wk Low: $60.968

Read below for the breakdown.

Since the beginning of the COVID-19 pandemic, digital communication has become a facet of life across the globe. From work to school to gatherings of any sort video communication has come to the forefront.

Given the huge demand, Zoom Video Communications has quickly become the leader of the space, causing the stock to run in parabolic fashion.

Due to its recent highs yet still ever-increasing demand, investors are left wondering whether the stock is still buyable at these levels. The answer to that question is yes, and the future looks bright.

$ZM in the first quarter alone proved what COVID-19 is doing for Zoom. In the Q1 report, Zoom reported an astounding 169% revenue gain according to Motley Fool.

Not only that but the coronavirus crisis boosted free cash flow to $251.7 million throughout Q1 and I expect these trends will continue as more workers, teachers, students, and citizens are pushed into digital communication as well.

Digging into the Q1 numbers $ZM reported an excellent beat. Zoom reported an EPS of $0.20 versus the $0.11 EPS consensus. Not only that but revenue came in stellar at a whopping $328 million.

Not only that but Zoom has positioned itself well when it comes to debt and cash. When last reported $ZM had zero debt on the balance sheet and a total cash on hand position of $1.105 billion as of April 30th.

While Q1 was great the Q2 report is expected to be far better. During the Q1 earnings call $ZM management set lofty targets and the growth if met will be stellar.

Management expects Q2 revenue of $495 million to $500 million and an EPS of $0.44 to $0.46.

With a crazy good first quarter and a positive second-quarter expected, many would think price targets must be high but surprisingly analysts are quite bearish at the moment on $ZM.

Currently, the average price target on $ZM is $238.17/share representing a disappointing -15.63% downside. On the otherhand, the high and low price targets are sitting on a wide range.

The high price target is currently sitting at $300.00/share representing a 6.28% upside and the low price target is at $180.00/share representing a -36.23% downside.

In short, I expect some upgrades for $ZM if management delivers or beats on its fantastic Q2 forecast.

Furthermore, the big money is not as bullish on $ZM. Currently, 58.01% of $ZM is owned by institutions. Top holders include Artisan Partners Limited Partnership, Baillie Gifford & Co, and BlackRock Institutional Trust.

Looking into the technicals the 6-month charts are not extremely attractive but are not bad.

Currently the 6 month RSI sits at 60.27 which is not attractive but not ugly. Secondly, the 6-month MACD sits at 4.63 and seems to be building minimal upward momentum.

Finally, the stock does not trade far off of its new highs of $295.97/share yet with upcoming earnings the stock could push and build new highs in the coming days given the strong upward momentum.

Overall I like $ZM into earnings on 31st. I have opened a small position today and am looking to possibly add on any dips. I believe a respectable price target into earnings is $300/share but in the case of extreme volatility, I recommend a close stop.


Disclaimer: This is not direct financial advice, simply opinion based on independent research.

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